We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether ICU Medical, Inc. (NASDAQ:ICUI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is ICU Medical, Inc. (NASDAQ:ICUI) a healthy stock for your portfolio? Investors who are in the know are taking an optimistic view. The number of long hedge fund bets advanced by 1 lately. Our calculations also showed that ICUI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). ICUI was in 17 hedge funds’ portfolios at the end of December. There were 16 hedge funds in our database with ICUI holdings at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the new hedge fund action encompassing ICU Medical, Inc. (NASDAQ:ICUI).
What does smart money think about ICU Medical, Inc. (NASDAQ:ICUI)?
At the end of the fourth quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in ICUI a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in ICU Medical, Inc. (NASDAQ:ICUI) was held by Nitorum Capital, which reported holding $85.7 million worth of stock at the end of September. It was followed by Point72 Asset Management with a $85.3 million position. Other investors bullish on the company included Citadel Investment Group, Partner Fund Management, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Nitorum Capital allocated the biggest weight to ICU Medical, Inc. (NASDAQ:ICUI), around 4.8% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, dishing out 4.67 percent of its 13F equity portfolio to ICUI.
As aggregate interest increased, specific money managers were breaking ground themselves. Partner Fund Management, managed by Christopher James, initiated the most outsized position in ICU Medical, Inc. (NASDAQ:ICUI). Partner Fund Management had $31 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $20.7 million position during the quarter. The other funds with new positions in the stock are Michael Rockefeller and Karl Kroeker’s Woodline Partners and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s now review hedge fund activity in other stocks similar to ICU Medical, Inc. (NASDAQ:ICUI). We will take a look at Wright Medical Group N.V. (NASDAQ:WMGI), Schneider National, Inc. (NYSE:SNDR), New Relic Inc (NYSE:NEWR), and FirstService Corporation (NASDAQ:FSV). This group of stocks’ market values resemble ICUI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WMGI | 46 | 1070415 | 7 |
| SNDR | 22 | 115086 | 4 |
| NEWR | 44 | 933575 | 8 |
| FSV | 12 | 170393 | -1 |
| Average | 31 | 572367 | 4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $572 million. That figure was $402 million in ICUI’s case. Wright Medical Group N.V. (NASDAQ:WMGI) is the most popular stock in this table. On the other hand FirstService Corporation (NASDAQ:FSV) is the least popular one with only 12 bullish hedge fund positions. ICU Medical, Inc. (NASDAQ:ICUI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on ICUI as the stock returned 1.3% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
